Courts will have formal powers to make costs-capping orders under changes proposed by the civil procedure rule committee.

The courts have been developing their costs-capping jurisdiction, most notably in personal injury and defamation cases, and the consultation issued last week is largely an attempt to codify what has been done so far, following a Court of Appeal request in 2007 to consider whether action was needed.

The committee said the approach to costs capping should be ‘conservative’ and orders should only be made in ‘exceptional circumstances’.

The draft rule says an order can be made if it is in the interests of justice to do so and there is a ‘substantial risk’ that, without it, costs will be ‘disproportionately incurred’ – and that this risk cannot be adequately controlled using case-management powers and a detailed assessment of costs.

It also highlights some of the issues the court would have to consider in exercising its discretion, such as any imbalance between the financial positions of the parties.

David Greene, head of litigation at London firm Edwin Coe and president of the London Solicitors Litigation Association, welcomed codification of the decisions on costs-capping that have been made so far, but said that the change ‘doesn’t necessarily overcome some of the problems that come with costs-capping’ – specifically, how to prevent the process becoming lengthy and expensive satellite litigation itself.

The draft rule does list among the issues the court should consider ‘whether the costs of determining the amount of the cap are likely to be proportionate to the overall costs of the litigation’. Greene pointed out that this raised the issue but did not solve it.

Law Society President Paul Marsh said: ‘We support the principle of proportionality in dispute resolution but when considering costs-capping orders the courts must also consider the processes which the court rules stipulate have to be complied with. It is these processes which are one of the main causes of high litigation costs.’